Tuesday, January 23, 2007

Foot-In-Mouth DiseaseRamblings By YusliThe head of Bursa Malaysia laid out the reasons why retail participation in the current bull run is low. My comments in blue.Foreigners are more bullish on and have stronger interest in Malaysian stocks than local investors, according to Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff. Foreign fund managers are gung-ho on Malaysian stocks. However, local investors seem to have no faith in domestic companies.Local investors have faith in the companies, just not so much faith in the ways of Bursa. Local investors are in the rally, just not at a level as the foreign investors' appetite. Yusli has to remember that we do not have contra trades like before; we do not have T+7 and contango deals like before - friend, you cannot have your cake, eat it and blame it on fat guy. When the restrictive rules are in place (which is good for the integrity and quality of the market), the changes are bound to be there. Blaming local investors of having no interest is very shallow, and just reinforces what is lacking in top level thinking.He noted that foreign institutional investors were the net buyers on Bursa, accounting for 35% of last year's daily volume. Locals, especially retail investors, were still waiting on the sidelines although the market had rallied for more than three months. Retail investors have not returned to the market in a big way yet. It would be a shame if our investors miss the rally on Bursa,¨ said Yusli, who blamed the slow retail interest on the lack of promotional efforts by stockbrokers.Why should local investors follow foreign buyers?? Are they always correct?? Or does Yusli want local investors to hold the bag for them when foreign investors leave the shores?? Yusli have no right to question the persuasions or strategy of local investors - everyone has their own way of investing. If they are not buying, they have their reasons, ... Yusli, the last I heard, you are not Big Brother, or am I mistaken?

The other thing is that foreign investors have a better incentive to buy Malaysian stocks, for the currency exposure, which could further boost their returns.Why would it be a shame to miss the end part of a rally (possibly)? Maybe local investors do not like the risk-reward ratio now. Where do you think Yusli will be if the market tanks to 1,000 next week? I don't think Yusli will be reducing his pay or options package. Every investor parks their hard-earned funds and assume the risks, ... what risks does Yusli assume other than the variation in his options.There are many undervalued stocks. And yet retail investors do not know what stock to buy, he said.The bullish sentiment on Bursa gathered strength in the second half of last year, led by plantation stocks and companies that were undertaking merger and acquisition activities.The strong rally had indeed overshot the expectations of many investment analysts.Please, Yusli, you think local investors are all stupid? Who do you think were the buyers at 900, 950 and 1,000 - the foreign funds interest then was very low, did I hear you tell foreign investors that they are idiots?? Many local investors did make money over the past 12 months, if they chose to lie low now, its their perogative, ... or is it that you have so many stocks, you are wishing the local investors to pump up the prices for you to get out??Are there really many undervalued stocks? Hmmm .... I bet you think Bursa is a buy at RM11.00 as well (for the record this blog did call a strong buy on Bursa shares at RM6.85 with a target of around RM10.00)If the analysts can be wrong, what makes you the King of The World? If analysts can be wrong, who can right, or righter?? So, shut your trap cos it sounds and smells alot like b.s. to a lot of people.

Could it be possible that one of the reasons for the apparent lack of retail participation in the market is that a large number of them may have given up investing on their own and instead put their money into Unit Trusts and let others manage their money?

Perhaps the Unit Trust companies and their sales people have done their job too well and successfully persuaded a great many people to invest via unit trusts instead of picking stocks themselves.

This may be the current situation. I have a feeling that at a later date when unit trust investors find that their investment take too long to give a profit (maybe due to the initial load and management fees) they may well abandon unit trusts and return to investing directly in stocks themselves.

About Me

Its Salvatore cos' Salvador was taken already. This blog hopefully embodies Dali's spirit: intelligence, creativity, deep dreams, symbolism, whimsicality, enrichment of lives (p/s only Asian girls are featured on the left column)